Pasari Spinning Mills Ltd Management Discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Indias economy is projected to grow by 7% in 2025, according to a report by the IMF which noted that multinationals extending their manufacturing processes into the country to diversify their supply chains will have a positive impact on Indian exports. The expansion in 2024 was driven by strong public investment outlays as well as the vitality of the services sector which benefited from robust local demand for consumer services and firm external demand for the countrys business services exports. These factors are expected to continue to support growth in India in 2025.Adverse economic conditions prevailed in major importing Countries, coupled with the Red Sea crisis are impacting the export of Indian textile products, including ready-made garments, to foreign destinations. However, with the US market showing signs of revival, experts believe exports to improve in the upcoming months. The domestic market, which accounts for around three-fourths of the overall demand, continues to witness a steady growth. Demand ahead of the spring-summer season in the West is likely to boost the off take of garments from India, thereby supporting the growth of the entire value chain. With better consumer demand big retailers in the overseas markets will have to restock inventory, improving order flow from Indian exporters. A favorable landscape marked by easing cost pressures and demand revival is likely to support the growth of Indian textiles in 2025. Addressing structural challenges and leveraging policy support are pivotal for the textile industrys sustained growth.

Indian Textiles Industry:

Indias textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fiber/yarns from natural fibers like cotton, jute, silk and wool, to synthetic/man-made fibers like polyester, viscose, nylon and acrylic. The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector.

The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. Indias textiles industry has a capacity to produce a wide variety of products suitable for different market segments, both within India and across the world.

2. OPPORTUNITIES AND THREATS:

The promoters of your company are planning to enter into retail industries, currently the retail market is lucrative when compared with manufacturing industries and thereby have the hope of recovering from the present financial crisis.

Opportunities:

India is one of the fastest-growing economies and this creates a boost in the purchasing power of the people while it also spurs the demand of products of the textile industry. This boost results in a wide range of capacity to manufacture different products that can be transported within India as well as across the world. Apart from this, India has one of the most extremely varied textile sectors as it has hand-woven textiles on one end while capital intensive mills on the other end which results in an enormous number of opportunities in the textile industry.

Threats:

Though there are many opportunities and investments in the textile industry, like any other industry, the textile industry of India also undergoes certain challenges. The frequently changing policies stated by the government at the central and state levels create immense pressure on the textile industry. Another challenge that the textile industry faces is the limitation to access the latest and best technology while also failing to meet the global standards in the competitive export market. Apart from these issues like competition from neighboring countries regarding low-cost garments is also the challenge the Indian textile industry faces.

3. SEGMENT WISE PERFORMANCE AND COMPANY OUTLOOK:

Due to:

• Increase in cost of raw material

• No substantial increase in the selling price of finished product (Cotton Yam)

• Regular absenteeism of the workmen

• Frequent interruption in the power supply

• Increase in the cost of electricity

• Higher Indirect Taxes, Power and Interest Rates

• Non favorable market conditions to the textile industry.

• There is Declining in Mill Segment.

Company was unable to run the factory, and the production was stopped from the end of July 2011, and the promoters, requested the Honble Labour Department to grant the permission for closure of the factory. The Honble labour department has granted the permission to close the factory located at Nanjangud vide its order No Ka.Ee 114 LMW 2007 dated 29th November 2011. PASARI SPINNING MILLS LIMITED was undertaking manufacture of Cotton Yarn at its Unit located at KIADB Industrial Area, Nanjangud, and Mysore District with spindle capacity of 17,472.

4. OUTLOOK:

The promoters of your company are planning for entering into retail industries, currently the retail market is lucrative when compared with manufacturing industries and thereby have the hope of recovering from the present financial crisis

5. RISK AND CONCERNS:

Risks:

General Economic conditions:

Presence in a highly competitive market and dependence on government & policy support and any slowdown in the global and/or Indian economy could adversely affect our business.

Textile business in general is sensitive to fluctuations in the economy. Since Worldwide spread of Novel Corona Virus (Covid-19), disruption of supply chain and elimination of Quota system will lead to fluctuations in Export demand and Continuous Quality Improvement is need of the hour as there are different demand patterns all over the world, could lead to a downturn in the Textile Industry.

Socio-political risks:

In addition to economic risks, the Company faces risks from the socio-political environment, internationally as well as within the country and is affected by events like political instability, extreme weather conditions, Unfavorable labour Laws and natural calamities etc. Concerns:

The Promoters of your Company, taken the permission for closure of the Factory from the Honble labour department, Government of Karnataka, which stopped the further losses of the Company

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Company has reviewed internal controls and its effectiveness through the internal audit process. Internal audits were undertaken for every operational unit and all major corporate functions under the direction of the Audit committee.

The focus of these reviews is as follows:

• Identify weakness and areas of improvement

• Safeguarding of tangible and intangible assets

• Management of business and operational risks

• Compliance with applicable statutes.

• Compliance with the Pasari "Code of Conduct".

The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the compliance reports submitted to them.

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO

OPERATIONAL PERFORMANCE:

The Company could not achieve the targeted results because of Closure of the factory.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

Your Company had not employed workers and staff including the factory and head office.